On August 17, 2018, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule (Proposed Rule) that proposes a comprehensive overhaul of the Medicare Shared Savings Program (MSSP). Among other changes, CMS proposes to:

replace the current three-track program with two options (Basic and Enhanced),

update the benchmarking methodology to incorporate regional trends from the start of an ACO’s participation in the MSSP,

expand the use of telehealth services by ACOs, and

permit ACOs to provide monetary rewards to beneficiaries for the receipt of certain primary care services.

The Proposed Rule’s preamble explains that these changes are intended to “more rapidly transition” ACOs to “performance-based risk” by creating a pathway for success to facilitate that transition. In an article accompanying the release of the Proposed Rule, CMS Administrator Seema Verma called the Proposed Rule (titled the “Pathways to Success”) a “new start” for the MSSP that addresses the limitations of the current program by seeking to move ACOs towards the acceptance of financial risk. If finalized, the Proposed Rule would result in the most significant changes to the MSSP since its inception. Notable proposed changes to the MSSP in the Proposed Rule are described below.

CMS is accepting comments on the Proposed Rule through October 16, 2018.

MSSP

The MSSP was initially established via regulations issued in November 2011, and subsequently revised in June 2015 (see our analysis of those rules here and here). Under the MSSP, ACOs consisting of ACO participants – such as physician groups and hospitals (identified by Taxpayer Identification Number (TIN)) – and ACO providers/suppliers (individual physicians and other providers/suppliers that may bill through the TINs of participants) agree to become accountable for the quality, cost and overall care furnished to Medicare beneficiaries. ACO participants and providers/suppliers receive Medicare fee-for-service payments for services rendered, that are reconciled at the end of each performance year against a historical benchmark determined by CMS. ACOs that satisfy certain quality performance metrics and save money compared to the benchmark are eligible to share savings with CMS. Certain ACOs participating in two-sided models also accept performance-based risk and therefore may be liable for shared losses with CMS in the event costs exceed the ACO’s historical benchmark.

Basic and Enhanced Tracks

The Proposed Rule proposes to replace current MSSP Tracks 1, 2, and 3 with two MSSP tracks: Basic and Enhanced.

The Basic Track contains 5 levels (A-E) that correspond to the level of risk assumed by participants. Levels A and B have no downside risk, and Levels C-E incrementally increase downside risk. CMS proposes that Level E be equivalent to the current Track 1+ model (and to retire Track 1+). CMS would limit ACO eligibility for Levels A and B based upon the previous participation of the ACO in the MSSP (if any), experience of the ACO and its participants in performance-based risk initiatives, and the revenue of the ACO (as further described below). The Basic Track also features a glide path under which ACOs will be transitioned to the next level within the Basic Track each successive performance year. Notably, Level E of the Basic Track (equivalent to the current Track 1+) would qualify as an Advanced Alternative Payment Model (AAPM) for purposes of the CMS Quality Payment Program (QPP).

Under the Basic Track, at Levels A and B an ACO would be eligible for savings of up to 25% based on quality performance, not to exceed 10% of the ACO’s updated benchmark. At Level C, the ACO would be eligible for savings of up to 30% (not to exceed 10% of the ACO’s updated benchmark), but it would also be liable for losses of up to 30% (not to exceed 2% of ACO participant revenue and capped at 1% of benchmark). At Level D, the ACO would be eligible for up to 40% of savings (not to exceed 10% of the ACO’s updated benchmark), and liable for losses of up to 30% (not to exceed 4% of ACO participant revenue capped at 2% of the benchmark). And in Level E, an ACO could earn up to 50% of savings (not to exceed 10% of the ACO’s updated benchmark) while being at risk for up to 30% of losses (not to exceed a percentage of revenue established under the QPP).

The Enhanced Track is essentially the same as the current Track 3. Under the Enhanced Track, and as in Track 3, an ACO would be eligible for savings of up to 75% based on quality performance (not to exceed 20% of benchmark), but exposed to potential shared losses between 40%-75% (not to exceed 15% of the updated benchmark). The Enhanced Track also qualifies as an AAPM.

As under the current MSSP, ACOs would only be eligible to share savings or losses once the ACO meets the applicable minimum savings rate or minimum loss rate (as applicable), based upon the ACO’s performance track.

Eligibility for Basic and Enhanced Tracks

CMS proposes to allocate ACO eligibility for the Basic or Enhanced Tracks based on an ACO’s experience with performance-based risk and an ACO’s revenue. Experience with risk is determined based on previous participation in a performance-based risk initiative, such as Tracks 2 or 3 of the MSSP, and high revenue ACOs are generally ACOs featuring institutional providers (hospitals) whereas low revenue ACOs are generally limited to physician groups. High revenue ACOs inexperienced with risk would be permitted to enter the Basic Track’s glide path at Level B (unless the ACO is a new legal entity, which may enter at Level A); whereas, low revenue ACOs inexperienced with risk are eligible for Level A. High revenue ACOs experienced with risk renewing in the MSSP or re-entering the MSSP would be required to enter under the Enhanced Track. Low revenue ACOs currently in Track 1+ would be able to enter the Basic Track at Level E, whereas high revenue ACOs currently in Track 1+ would be required to enter under the Enhanced Track.

2019 Performance Year

To account for the significant revisions contained in the Proposed Rule, CMS proposes to cancel the 2018 application cycle for new MSSP agreements with a start date of January 1, 2019. Instead, CMS would commence the Pathway to Success program as of July 1, 2019 (at the earliest), but also briefly suggests an alternative under which the new program commences as of January 1, 2020.

ACOs that are currently in the middle of a three year agreement will be allowed to continue participating in the MSSP under the terms of that agreement until its expiration, unless such ACOs choose to terminate early to join the Pathways to Success program. ACOs that had entered into a new or renewal agreement as of January 1, 2016, which agreement is scheduled to expire as of December 31, 2018, will be offered the opportunity to extend that agreement by renewing for a fourth performance “year,” which will last for six months from January 1, 2019 through June 30, 2019. However, if CMS postpones the new program until January 1, 2020, such ACOs would be permitted to renew their agreement for the full 12-month period, ending December 31, 2019.

2019 Agreement Renewals

ACOs that choose to renew MSSP agreements scheduled to expire as of December 31, 2018 would be required to notify all participants, providers/suppliers and all other individuals or entities performing ACO-related functions of such renewal. Renewing ACOs would also be required to ensure that all of the foregoing individuals and entities agree to their continued compliance with MSSP requirements. An executive with authority to bind the ACO must certify the election to renew “in a form and manner and according to the timeframe established by CMS.”

Importantly, the Proposed Rule also gives expiring ACOs that extend their agreements the opportunity during 2018 to make changes to their ACO participant list to be effective for the 6-month performance year from January 1, 2019, to June 30, 2019. Initial guidance from CMS officials indicates that ACOs currently considering an extension or renewal should submit information on proposed participants to CMS by August 29 to assure inclusion as of January 1, 2019 (whether or not the Proposed Rule is finalized).

CMS also emphasizes in the Proposed Rule that the current MSSP regulations “prevent duplication of shared savings payments…ACOs may not participate in the Shared Savings Program if they include an ACO participant that participates in another Medicare initiative that involves shared savings.” CMS notes that if an ACO Participant remains in the MSSP under its current agreement past June 30, 2019, it would not be eligible to newly join an ACO that starts participating in the Pathways to Success program as of July 1, 2019. This restriction could affect the ability of physician groups and other providers/suppliers currently participating in non-MSSP shared savings programs (such as the Next Generation Model) to join Pathways to Success as of July 1, 2019.

2019 Reconciliation of Shared Savings and Losses

Under the Proposed Rule, CMS contemplates a bifurcated 2019 with two separate performance “years” for ACOs joining the Pathways to Success program: January 1 through June 30 under the current MSSP, and then July 1 through December 31 under the new Pathways to Success program. As a result, in 2019 CMS will assess an ACO’s performance over the entire calendar year, and then pro-rate shared savings and losses across the two performance periods (assuming the ACO participates in both). CMS proposes to provide separate reconciliation reports for each performance period during 2019, but will only perform the financial reconciliation at the end of calendar year 2019.

2019 Quality Reporting

CMS proposes to use the current MSSP standards for determining quality performance during both of the performance “years” in 2019. Existing MSSP standards require new ACOs to meet a quality performance standard based on a complete and accurate reporting of all quality measures, whereas current ACOs and renewing ACOs are assessed based on a quality performance benchmark and minimum attainment level for quality measures. For ACOs that participate in only one of the 6-month performance years, CMS proposes accounting for the ACO’s quality performance using quality measure data for the 2019 calendar year. Further, CMS proposes to use the most-recent certified ACO participant list available at the time the quality reporting samples are generated and the assignment methodology most recently applicable to the ACO for a 2019 performance year, in determining the quality reporting samples for the 2019 reporting period.

Beneficiary Assignment

In the Proposed Rule, CMS suggests a new approach that separates the choice of beneficiary assignment methodology from the choice of participation track, thereby granting ACOs flexibility in their annual election of assignment methodology. Beginning July 1, 2019, CMS proposes to allow all ACOs (whether on the Basic or Enhanced Track) to choose their beneficiary assignment methodology: prospective assignment or preliminary prospective assignment with retrospective reconciliation. ACOs will also be allowed an opportunity to change their selection of beneficiary assignment methodology on an annual basis.

In addition to changes to the beneficiary assignment methodology, the Proposed Rule also proposes changes to the definition of “primary care services” used in beneficiary assignment to an ACO that would take effect on January 1, 2019. Specifically, the Proposed Rule proposes to expand the definition of primary care services to include procedure codes for advance care planning, administration of health risk assessment, prolonged evaluation and management or psychotherapy services beyond the typical time of the primary procedure, annual depression screening, and alcohol misuse screening, as well as add-on codes for visit complexity related to evaluation and management services.

SNF 3-Day Rule Waiver

In connection with its proposal to allow ACOs to select preliminary prospective assignment of beneficiaries with retrospective reconciliation, CMS proposes to expand the availability of the SNF 3-day rule waiver to Basic Track ACOs in a two-sided model (Levels C-E) and Enhanced Track ACOs. The SNF 3-day rule is a Medicare payment rule that prohibits payment for a skilled nursing facility (SNF) stay unless the beneficiary has been admitted to the hospital as an inpatient (not observation status or in the emergency department) for no fewer than 3 consecutive days. Currently, ACOs in Track 3 may apply to use the SNF 3-day rule waiver, which waives applicability of that Medicare payment rule for prospectively assigned beneficiaries and certain excluded beneficiaries and thus expands the ability of the ACOs to refer patients to SNFs after inpatient hospital stays of fewer than 3 days.

Benchmarking

Currently, CMS calculates the cost benchmark for new participants in the MSSP based in part on the use of national growth rates to trend forward Medicare expenditure data for each of the years making up the ACO’s historical benchmark based on the types of beneficiaries that would have been assigned to the ACO. Starting with an ACO’s second or successive renewal term in the MSSP, CMS shifts to use regional growth rates to calculate an ACO’s historical benchmark, which is based on the ACO’s actual risk-adjusted historical expenditures, an approach that was implemented for renewing ACOs only in 2016. In the Proposed Rule, CMS expresses concern that the current methodology relying on the regional adjustment can lead to overly inflated benchmarks for ACOs that are relatively low spending compared to their region, whereas ACOs with higher spending compared to their region may find little value in remaining in the MSSP when faced with a significantly reduced benchmark. To address this issue and concerns about the effectiveness of relying solely on national growth rates at the commencement of an ACO’s MSSP participation, CMS proposes incorporating regional expenditures into the benchmarking methodology for ACOs for all ACOs entering (or renewing) the MSSP beginning on July 1, 2019 and in subsequent years. To offset concerns about over-reliance on regional trends, CMS proposes to blend national and regional figures and reduce the maximum weight used in calculating the regional adjustment from 70% to 50%.

Telehealth

Currently, there are several requirements for Medicare reimbursement of telehealth services. Generally, the patient receiving telehealth services must be at an “originating site” located in certain geographic areas and the originating site must be a physician’s office, hospital or other specified health center. In the Proposed Rule, CMS proposes to expand payment to physicians and other eligible practitioners billing through the TIN of an ACO participant for telehealth services by removing the geographic limitation on the originating site and permitting a patient to use his or her home as an originating site. However, Medicare would not pay a facility fee where the originating site was a patient’s home. These telehealth payment policies would be effective beginning in performance year 2020 and would apply only to ACOs participating in a two-sided risk model that choose to assign beneficiaries using the prospective assignment method.

Beneficiary Incentives

The Bipartisan Budget Act of 2018 also allows ACOs to establish beneficiary incentive programs to provide incentive payments in amounts up to $20.00 (adjusted annually by the percentage increase in CPI) to assigned beneficiaries who receive qualifying primary care services.

The Pathways to Success Program would allow ACOs participating in two-sided models to establish beneficiary incentive programs to provide incentive payments to assigned beneficiaries that receive qualifying services. A qualifying service is a primary care service with respect to which coinsurance applies under Part B and is furnished by an ACO professional who qualifies as a primary care physician, or an ACO professional who is a physician assistant, nurse practitioner, clinical nurse specialist, federally qualified health center, or rural health center. CMS proposes that incentive payments must be cash equivalents (such as a check, debit card or other traceable cash equivalent) and not cash. Incentive payments must be provided by the ACO within 30 days of a beneficiary receiving a qualifying service, and cannot be offered as part of an advertisement or solicitation to a beneficiary or any potential patient enrolled in a federal health care program.

The Proposed Rule would require each ACO to fully fund costs of the beneficiary incentive program and prohibit ACOs from accepting funds for incentives from an outside entity (such as a pharmaceutical company or insurance company).

Beneficiary Notifications and MSSP Opt-In/Out

The Proposed Rule contains a new requirement that ACOs notify a beneficiary of assignment to the ACO under the MSSP at the beneficiary’s first primary care visit of the year, in addition to the current program requirements for the provision of notice via signage and upon request.

CMS also proposes to require ACOs to notify beneficiaries of their ability to “opt-in” to the ACO annually (or opt-out) and for ACOs to report opt-in information to CMS. In one section of the Proposed Rule, CMS suggests that “opting-in to a Shared Savings Program ACO could be similar to enrolling in a [Medicare Advantage] plan.” Under one approach CMS is considering, a beneficiary would only be assigned to the ACO if the beneficiary opted in to assignment under the MSSP. Beneficiaries that opt-in would retain their right to seek care from any Medicare-enrolled provider or supplier, inside or outside the ACO. CMS also acknowledges concern that reliance on an opt-in assignment approach “as the sole basis for assigning beneficiaries to an ACO” could create an obstacle for certain ACOs to meet the mandatory minimum assignment of 5,000 beneficiaries.

Certified Electronic Health Record Technology (CEHRT)

Under the Proposed Rule, starting on January 1, 2019, ACOs in a track or payment model that is not an AAPM must attest and certify that at least 50% of eligible clinicians participating in the ACO use CEHRT to document and communicate clinical care. In connection with this, CMS proposes to retire the EHR Quality Measure under the QPP (measure ACO-11), which currently assesses the level of adoption of CEHRT by ACO’s eligible clinicians.

Coordination of Pharmacy Care

In the Proposed Rule, CMS solicits comments on permissible collaboration arrangements between Medicare Part D sponsors and ACOs as part of efforts to enhance coordination of pharmacy care for beneficiaries. CMS explains that increased collaboration between ACOs and Part D sponsors may facilitate better and more affordable drug treatment options for beneficiaries by encouraging the use of generic prescription medications when appropriate, or reducing medical errors.

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